Seeks to avoid inside-the-Beltway regulatory turf battle Treasury Secretary Timothy Geithner unveiled sweeping new "rules of the game" for Wall Street during Congressional testimony Thursday. Geithner's proposals -- most of which will likely require new legislation -- would extend federal regulation of derivatives trade and place tighter controls over hedge funds. The new rules will require financial institutions to hold more capital as a buffer against losses and will bolster risk-management standards. The proposals would mean significant expansions of power for regulators but Geithner sought to avoid an inside-the-Beltway regulator turf battle. Geithner said he was trying to concentrate on the substance of the reform agenda, "rather than the complex and sensitive questions of who should be responsible for what." Geithner also sought to extend federal regulation for the first time to all trading in financial derivatives. Geithner asked Congress to require all "private investment funds with assets under management over a certain threshold" to register with the Securities and Exchange Commission and disclose certain information so government officials can determine whether their size or complexity puts the broader economy at risk. Hedge funds advisers will also have to register with the SEC under the Geithner plan. "In the wake of the Madoff episode it is clear that, in order to protect investors, we must close gaps and weaknesses in regulation of investment advisors and the funds they manage," Geithner said. The SEC should also develop stronger rules for money market mutual funds to reduce the risk of runs on the funds. Geithner also discussed proposals that have already been made public, including a systemic regulator that would be able to delve into all corners of financial markets, and new government powers to oversee the liquidation of a firm that might damage financial markets if it was allowed to fail. Firms that are deemed to be systemically important large institutions must be able to give the government a comprehensive report on their aggregate counterparty risks exposures "within a matter of hours." Regulators would be able to issue standards for executive compensation practices across all financial firms. Experts said the Geithner proposals were bold but said the devil would be in the details. Lobbyists said they wanted to know who was going to be deemed as a systemically-important firm. Some of Geithner's rhetoric could be described as more hope than anything else. He talked about the importance of global rules so that no country becomes a haven for riskier activities. President Obama will push the G-20 leaders to join "a race to the top rather than a race to the bottom," Geithner said. But already countries like the United Kingdom are moving to protect their financial markets from international oversight.

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